A War of Words Over Euro Crisis

By MELISSA EDDY and NICHOLAS KULISH, The New York Times

BERLIN — A telephone conversation on Friday between Germany’s chancellor and Greece’s president became the latest flashpoint in the war of words between Berlin and Athens in the unfolding crisis over Greece’s membership in the euro.

All sides agree that Chancellor Angela Merkel spoke by telephone with President Karolos Papoulias on Friday. A spokesman for the caretaker government, Dimitris Tsiodras, said Ms. Merkel “conveyed to the president thoughts regarding a referendum that could be conducted in parallel to the elections, asking Greeks whether they want to remain in the euro zone.”

A spokesman for Ms. Merkel’s government swiftly denied she had called for a referendum, but not before Greek politicians blasted the alleged proposal. The leftist leader Alexis Tsipras accused her of treating Greece like a “protectorate.” The Socialist Party stated that “referendums fall exclusively within the competencies of the government and the Greek Parliament, not the EU or other member states.”

The Greek conservative leader Antonis Samaras called it “unacceptable” for Germany’s chancellor to issue such a proposal.

The quick condemnation from Greek politicians illustrated unequivocally how raw feelings are in Athens over questions of sovereignty and underscored how the uncertainty over Greece’s future has turned rumors and unconfirmed reports into fuel for even more heated exchanges. The dispute was only the latest fallout from the instability in Greece, which continued to roil markets across Europe.

Top European officials also contradicted each other Friday over planning for the possibility of a Greek exit from the euro. In the meantime a leading ratings agency downgraded 16 Spanish lenders.

With a caretaker government now in place and only four weeks to go until the next round of parliamentary elections in Athens, a broad effort is underway by Germany and its European partners to make it clear to Greek voters exactly what is at stake when they cast ballots on June 17.

Germany finds itself in a delicate position, not wanting to encourage the opposition forces in Athens that failed to form a government after the last election by appearing to interfere in the election, while simultaneously using all possible channels to communicate to Greek voters that their country’s future in the 17-member euro zone depends on electing a government that will uphold its loan agreement with the European Union, European Central Bank and the International Monetary Fund.

Comments by a European Union official, who joined businesses and financial firms in signaling that contingency plans are being drafted to deal with the potential fallout of a Greek exit, pointed to how real the readiness to cut Greece loose may be. “Today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn’t make it,” the European trade commissioner, Karel De Gucht, said in an interview published Friday in the Belgian newspaper De Standaard.

Mr. De Gucht’s comments prompted a rare public rebuke from a colleague, illustrating how the raw nerves are not just in Athens over the uncertainty surrounding Greece, which saw its credit rating downgraded further into junk territory by Fitch Ratings late Thursday, on concern over a lack of public and political support for the country’s bailout.

“Karel De Gucht is responsible for trade. I am responsible for financial and economic affairs and relations with the E.C.B.,” the vice president of the European Union Commission, Olli Rehn, said during an event in London. “We are not working on the scenario of a Greek exit. We are working on the basis of a scenario of Greece staying in.”

European Union offices in Brussels were closed Friday and a spokesman for Mr. De Gucht could not be immediately reached for comment.

While continued support for Athens remains the official line, many influential people in Germany would like to see Greece driven from the euro zone, some as an example to other countries and others for what they say is its own good chance to recover. If Syriza, the party that opposes the terms of Greece’s current bailout plan, were to come out ahead in the next election and overplays its hand, it could find itself with an invitation to leave.

Shares in Spanish banks fell at the opening of trading, Reuters reported, after the ratings agency Moody’s downgraded 16 lenders late Thursday, citing a weak economy and the government’s reduced ability to support troubled lenders.

“There is a good argument for the view that Greece is the basket case — to be very frank and plain — get rid of them and the other countries’ politics and economics are much sounder,” said Jürgen Matthes, senior economist at the Cologne Institute for Economic Research.

Rumors of a Spanish bank run this week show how delicate the situation in Europe has become, leading to a series of public comments by leaders that appeared intended to calm the situation and perhaps hold out a little hope to Greek voters. Earlier this week, Ms. Merkel suggested in a television interview her openness to stimulus programs for Greece.

“In early 2010 you could be skeptical but I think in the meantime the politicians, the ministries, have talked to the financial markets,” Mr. Matthes said. “The awareness of the dangers of contagion effect is much bigger.”

The leaders of the world’s top economies will meet this weekend at Camp David. Ms. Merkel is expected to come under significant pressure to buoy the Greek economy and prevent an unpredictable exit from the euro zone, and resulting contagion that could snuff out the recovery of the United States economy, not to mention destabilize the world financial system.

But opinion surveys show that German voters continue to support the chancellor’s tough line on austerity abroad, even if they did chasten her party for pursuing it at home in recent regional elections.

Ms. Merkel’s soothing words on growth and even the possibility of stimulus are not, many experts here say, intended for Greece so much as President François Hollande of France and Prime Minister Mario Monti of Italy. Greece’s fate is in its own hands, Ms. Merkel and her advisers have repeatedly said, and there is every reason to believe that they mean it.

The president of the European Parliament, Martin Schulz, was in Athens on Friday, where he told German public radio, “I consider the whole speculation over whether Greece should be written off not without danger.”

As a representative of a European institution, Mr. Schulz, a German and a Social Democrat, felt freer to engage in direct political dialogue with Greeks. “Those who are telling you, ‘We don’t have to pay anything back, we don’t have to restructure, the Europeans will keep paying,’ they are leading you into a disaster.”

German officials have tried to exert pressure on the Greeks without appearing to meddle in the domestic political process. The German media have shown little compunction.

The Frankfurter Allgemeine Zeitung, an influential daily newspaper, ran an editorial on the front page calling the last Greek election “just the overture,” and stating that Greek voters needed to understand that the upcoming return to the polls would be “a referendum on the question of whether the Greeks would stay in the euro zone or not.”

The article seemed written to push Greek buttons, saying that with a return to the old drachma currency, Greece would be “an upmarket Bulgaria,” referring to Greece’s neighbor, which after decades of Communist rule lagged far behind Greece in its development. Even after leaving the euro, Greece could still receive aid, but it would no longer be credits but instead “a form of humanitarian emergency aid.”

Finally the paper said “hopefully one won’t have to consider an international protection force,” as in countries to the north, referring presumably to Bosnia and Kosovo.

Melissa Eddy reported from Berlin, and Nicholas Kulish from Munich. Niki Kitsantonis contributed reporting from Athens, and Paul Geitner from Brussels.